Management by Pathology

TRD101: Management by Pathology

by Michael Maynard

June 19, 2006



To be a successful management consultant and interim senior manager, you have to have a pretty high opinion of yourself and your capabilities. Over the course of 20 years, my partners and I developed a running joke. The good news about consulting is that you see a lot of companies. The bad news is that you see A LOT of companies. Approximately 10% of the time, you’re being hired because the company is doing well and management wants the company to keep doing well and to do better. Those consulting assignments are fun.

The other 90% of the time, you know that you’re being hired because of bad managerial decisions and you’re there to get the company out of trouble. To take on the troubled company’s assignment, you implicitly assume that you’re better than the existing management. And 99% of that 90% of the time, the assumption is accurate.

Of course, every company’s management has its typical proportional share of idiots, petty tyrants, arrogant SOB’s and fools. Really troubled corporations have more than their share of morons, psychopaths and mental defective in management because who else would work in this cuckoo’s nest. Scott Adams’ “Dilbert” comic strip has done a valuable service in accurately describing the inner workings of most corporations. While Murphy’s Law applies to the rest of bad managers, from my experience, I’ve noticed that the really bad ones fall into certain abnormal personality types.

Self-Promoter: The Self- Promoter loves to get his/her name in the media and the amount of publicity they get is in inverse proportion to their ability. One of my clients had a very good and stable mailing list business. The company’s mailing list business could be expanded by drawing upon their existing competency and provide this product for other niche markets. No, that wasn’t sexy enough for this Self-Promoter, who wanted to be known as the next high-tech managerial legend. He drained the money from the existing business, which started to slip, and used it to create a number of internal “start-up” companies that would expand the company so much and rapidly that he was already planning for the stock exchange listing. The parent company had no experience in any of these start-up areas and no managerial expertise in starting up new companies. At the same time, the SP kept giving talks to industry groups, colleges, trade shows, wherever the press would show up.

The press bought into the idea that he was one of the top high tech executives in the world. The company did go public and the stock valuation was high due to speculation and expectations. Two years later, none of the start up succeeded, the core business declined and the stock was being traded for pennies.


Schmoozer: The Schmoozer is great on the golf course with clients or in front of a group of financial analysts because he oozes insincere charm and flattery. .He’s made it along the way because everyone thinks he’s a great guy. He/she can hide his lack of detailed knowledge once he reaches mid-level management level because he doesn’t have to do anything or make any decisions, just shuffle papers. As long as The Schmoozer scripted or isn’t pressed for details on how his business is doing, he’s great. When it comes times to make a decision on an important operating issue, he’s off working on his putting stroke instead. In the Fortune 100, the Smoozers are usually well-connected politically.

I worked for a Schmoozer. I was one of the first hires for what was going to be the next Digital Equipment or Wang Laboratories. My role was “minister without portfolio” which meant I worked on marketing issues one day, manufacturing issues the next and accounting operations the next. I had great fun and it was this experience that led me to become a consultant. I had been in a number of meetings with the Schmoozer over 2 years about strategic issues and developing the company’s financing business plan. He stopped me in the hall after one of the financing business meetings and asked why I, who he thought worked for one of the company’s vendors, was in this meeting. His secretary had to intercede toe explain who I was and that he helped hire me 2 years prior, or else he was all set to fire me.

Sharpie: No, not the Terrell Owens type of Sharpie, but the type who is always looking for a shortcut or a way to get ahead, whether legally or illegally, and always at someone else’s expense.

A former multi-millionaire “friend” asked my company to do an analysis of a company he was trying to acquire through receipt of a US government backed loan. What he wanted was my partners and I to produce a glowing report to the agency as the final step to obtain the loan. What the agency got as a thorough analysis of a good little company with nice, hard working people in it, but even with a dramatic turnaround could not support repayment of the loan. At the agency’s suggestion, we then checked into his other financing that would back the loan, and found some curious transactions involving non-existent offshore banks.

When we delivered to the report to the agency, my so-called friend went linear, accusing me of stabbing him in the back. What he wanted was for us to do something illegal, which involved fines and jail time, for filing a knowingly inaccurate (a/k/a lying) report to a federal government agency for use in securing a loan.

There were other and legal alternatives to acquiring this company, which could have done pretty well, though would never be a spectacular success. These alternatives involved investing his own money and securing any loan with personal assets. No, he had a scam going and didn’t really didn’t need to have one.

Whackball: Not just your typical managerial moron, psychopath or mental defective, the whackball’s personality is erratic and toxic which makes life hell for his employees. I’ve worked for two whackballs.

The first was a really a salesman, and his demeanor or skills weren’t compatible for being a senior manager. Out of the blue, for no reason at all, he would scream at any of his reports for non-existent transgressions, like not giving him a monthly report he wanted. Explaining to him that it was only mid-month and the report wasn’t produced to the end of the month only made the screaming worse. Then twenty minutes later, he would come up to you in private, put his arm around you and tell you what a great job you were doing. I, like his other managers, tried to stay as far out of his way as possible. To fortify myself for another day of his craziness, I used to drink a six-pack of Tab and eat three large candy bars on my way to work. I was making myself so wired that anything this guy would do would just bounce off the buzz armor.

The second was a software engineer who had started a software development consulting company. He called for help because there was a pattern of half of his employees leaving every three months. For the uninitiated, software engineers are a mutant species. Three generations of software engineers absorbing radiation from hours on end programming right in front of computers have altered their genetic structure. The mutants have bulging eyes, pale complexions, long curved necks and fingers, ability to stay up for days on end, and devoid of social skills.

This software entrepreneur viewed himself as the second coming of Bill Gates and couldn’t understand why those who left didn’t want to be help him develop the new Microsoft. Bill Gates has billions of dollars, so people will tolerate him being completely narcissistic. If you don’t have billions of dollars, then having staff meetings at 3 AM, calling people at home at all hours about how miserable you are, and then ignoring them for days when together in person doesn't endear yourself to anyone. He tried the 3 AM telephone call with me once. I left the phone off the hook and he was still talking when I awoke 3 hours later.

What all five of these personality types have in common is that because of their pathology, they put their own needs ahead of those of the company they are encharged to lead and steward. Individually, these managerial types can cause damage, but the employees find ways to work around them. It’s when you get two or more of them together is when there is real trouble.

Various people have asked me how an Enron can happen. Enron had the combination of the Schmoozer President, Ken Lay, and the Sharpie, Jeff Skilling. They were a perversely symbiotic pair, Lay needed Skilling to run the company, and Skilling needed Lay to present the smooth public presence to provide cover for what Skilling was doing. There’s no way that Ken Lay could come up with Raptors subsidiaries or deevloping derivative markets for the weather and network bandwidth. The culture the two created facilitated middle-level managers to come up with schemes to reallocate electricity from California and then sell the electricity back to the state at much higher prices.

What Lay liked was all the attention his company was getting and his picture on the cover of Business Week and Fortune. Even the recent trial didn’t completely settle the question of how much he really knew. As President of Enron, he was supposed to know and should have known. As a Smchoozer, more interested in sleeping in the White House Lincoln Room, he attended the board meetings (which leaves the question of why the members of the Enron board were not tried for negligence and conspiracy) and as long as the company kept growing rapidly, he left Skilling to his own devices.

For Skilling, ex-large management consulting firm employee, Lay’s noninvolvement allowed him to really be running the company. Someone as driven as Skilling to prove that he could create the largest company in the world, any means that would facilitate that goal, was fine. He and the CEO, Andrew Fastow, probably had great fun cooking up all these innovative schemes, until they got caught, by someone who asked why the numbers on the financial statements didn’t add up, a question Lay should have asked many times before.

Put two pathological executives together and what happens is an outlaw company (Microsoft gets spared this time). Employees lose their jobs and pensions, and individual investors lose their life savings. All because one wanted to be famous and the other wanted to be an industry giant. A sad end for two very sad people and all those they defrauded.

TRD101 knows this: Failed companies just don’t happen, it takes a combination of pathological managers' efforts. Enron wasn’t the first example of this, but it may remain the largest and most pathological failure ever. Enron was breathtaking in how quickly and how extensively the pathologies of two men caused this company to rise and collapse, falling heavily down upon all innocents unlucky to have had any involvement with it.

And that is The Real Deal 101 for today, like it or not.
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© Copyright Michael Maynard, TRD101, June 2006.